DAX: German Consumer Confidence Takes a Hit – GDP Growth Flat
Analysts forecast a slight improvement in consumer confidence, to -18 from -18.6, but the number came in at -22.
GDP Growth YoY for Q2 was flat at 0%, a third consecutive improvement for the economy after reaching a bottom of -0.3% in Q3 2023. The DAX hardly reacted to the subdued news for German consumers and economy, still trading close to flat on the day.
This data comes after yesterday’s Ifo Institute Business Climate data showed a 4th consecutive decline to 86.6 from 87 last month. Clemens Fuest, Ifo Institute president, noted that the manufacturing sector declined notably.
With companies naming another significant drop in in their portfolio of orders, and general unsatisfaction with the overall economic climate. Commerzbank forecasts that an economic recovery in the coming months is becoming less likely.
The German bank also added that structural problems to the German economy are hindering its recovery. The bank forecasts little to no growth for the full year 2024, while it sees the economy expanding by 0.5% for 2025.
This doubtful analysis of the Eurozone’s largest economy opens the way for another ECB cut in September. While countries like Italy and France are showing signs of economic expansion, the weight of the German economy within the Eurozone cannot be denied.
According to the Dutch bank ING, Ifo data suggest Germany may be heading for a prolonged stagflation. Global economic weakness, geopolitical tensions, and internal political uncertainty seem the causes of Germany’s weak economy.
Philip Lane at Jackson Hole
Philip Lane, ECB Chief Economist, stated on Saturday that there had been some positive progress with inflation. Inflation is returning to the 2% target; however, success is not yet guaranteed.
Adding that the central bank still needs to keep a restrictive monetary policy for some time. However, it’s also true that monetary policy would still remain restrictive in the case the ECB cuts rates to 3.5% from the current 3.75%
Lane also pointed out that keeping rates high for extended periods of time would produce chronically low inflation. And Become inefficient in minimizing the collateral effects on the economy and unemployment.
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